Interrupting unemployment benefits early may have hurt state economies.

When states began cut off federal unemployment benefits this summer, their governors argued that this move would make people return to work.

New research suggests that the end of the benefits actually led to some people getting jobs, but that far more people did not, leaving them – and perhaps also the economies of their states – at a disadvantage.

A total of 26 states, all but one with Republican governors, have moved to complete the extended unemployment benefits that has been in place since the pandemic began. Many business owners blame the benefits of discouraging people from returning to work, while supporters claim they have provided a lifeline to people who lost jobs in the pandemic.

The extra benefits expire nationwide next month, though President Biden said Thursday encouraged states with high unemployment to use separate federal funds to continue the programs.

To examine the impact of the policy, a team of economists used data from Earnin, a financial services company, to review anonymous bank records of more than 18,000 low-income workers who received unemployment benefits in late April.

The researchers found that cessation of benefits had an effect on employment: In states that cut benefits, about 26 percent of people in the survey worked in early August, compared with about 22 percent of people in states that continued the benefits.

But far more people did not find jobs. In the 19 states that joined the programs for which researchers had data, about two million people lost their benefits completely, and one million had their payments reduced. Of those, only about 145,000 people found jobs due to the outage. (The researchers argue that the true figure is probably even lower because the workers they studied were the people most likely to be severely affected by the loss of income, and therefore may not be representative of everyone who received benefits.)

Cutting benefits left, on average, unemployed workers worse off. Researchers estimate that workers lost an average of $ 278 a week in benefits due to the change, earning only $ 14 a week in earnings (not $ 14 an hour, as previously reported here). They compensated by reducing spending by $ 145 a week – a reduction of about 20 percent – thus putting less money into their local economies.

“The job market didn’t show up after you kicked these people off,” said Michael Stepner, an economist at the University of Toronto who was one of the study’s authors. “Most of these people are not finding jobs and it’s going to take a long time to get their earnings back.”

The results are consistent other recent research to have found that the extra unemployment benefits have had a measurable but small effect on the number of people working and looking for work. The next evidence comes on Friday morning, when the Ministry of Labor will publish data at the state level on employment in July.

Coral Murphy Marcos contributed reporting.

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